If zoning regulations mean you're only going to be able to service 1/4 of the annual new construction demand, then the smart money is on serving the high end of the market. If things get zoned in a way that you can serve the whole market and not just the top end, you can bet that people will figure out how to build those units too. The market has been artificially constrained so that developers are making the choice between the segment of the market they want to serve, not serving the whole market. If they had the access to serve the whole market, we'd see someone who can get creative and do it cheaper, or more efficiently to compete on price instead of luxury.
This is generally caused by strict land use and single family zoning. In a situation where you can build a duplex/triplex/4plex on every single family lot, you can run an excess of housing in the areas that people actually want or need to live in which allows people to compete on other market factors like price.
Most of the markets in goods and services seem to evolve towards hollowing out the middle: companies offer either bottom-tier garbage or luxury price (but not necessarily luxury quality) options for those not price-sensitive. What makes people think housing is different? That with unencumbered ability to build, we'll end up with decent-quality, livable, mid-tier apartments? Other markers show we should expect a mix of luxury apartment with barely-livable tin can sized slums complexes. And all of them for rent, not to buy.
Not true. Automobiles have become vastly better at all price points over the last 50 years. Safer, more fuel efficient and longer-lasting. The same applies to smartphones, PCs, televisions, etc. And laser eye surgery. And passenger air travel since the Carter administration de-centralized (de-regulated) it in the late 1970s.
I won't comment much on automobiles - I don't buy new, and don't know anyone who buys new. It's all used market, and we're dreading the day the newest, touchscreen-controlled cars will be all that's available. But it appears to me that this market is highly regulated - safety, fuel efficiency and longevity still hit the bare minimum, just the legal minima have been tightened over the years.
Laser eye surgery - I wasn't even aware this is a category and there is much to differentiate between service providers on the surgery specifically. Plus, it's another tightly-regulated space, countering natural market tendencies.
Passenger air travel - you must be traveling first-class only to not notice that everything below is bottom-tier and getting noticeably worse every year. Sure, it's more affordable - I don't dispute that - but it's a question of how bad can quality go before it trumps price.
Smartphones, televisions - all examples of what I'm talking about. A huge amount of bottom-tier products, a few high-end flagship products. There's a degree of market segmentation so there's still some middle-tier options, but my impression is, they're rapidly dragged to the bottom.
As specific examples of what I have in mind, most of which I observed personally: everything not regulated about private healthcare; bikes and bike parts; food across the board; manual tools and power tools; clothes; toys; just about every commodity electronics. It's all low-quality noname brands, low-quality fake pseudo-brands, brands tricking people with old reputation, then nothing at mid-tier, then pricey brands that didn't start "capitalizing on their reputation" just yet.
Overall, what I'm saying is that the natural tendency of the market is to optimize offerings to be the cheapest and shittiest the market can bear - and I think this is a problem; there's a mid-point we can't seem to be able to keep in established markets. And in arguments for deregulating housing, I don't see anything addressing this tendency.
Seems like its just a 1-to-1 mapping of peoples wealth. The middle class is disappearing and the remainder organize into the upper class or fall into the lower class.
>Overall, the last 30 years have seen a revolution in automobile design. Better materials, longer reliability, and yes ease in repair.
>My grandfather restores classic cars, and I've been driving for 20 years. My first car was a '73 Volkswagen Beetle and he has Fords from the 50s-70s. I don't think he's even ever been in a car that wasn't a Ford. His daily driver is a F150, and my grandmother's is a Crown Vic-- both of which are a decade old.
>Nowadays, cars are built to survive, and they survive for years longer than cars from the 50s, 60s, or 70s. And once they're done for, they're designed to be easily recycled for reuse in other cars or products.
>Looking under the hood of my Outback, I see that the entire wiring harness has thick plastic coating, ABS plastic weatherproof connectors, and every inch of free-floating wire is wrapped in a wire loom.
>Compare that to a 50s-60s Ford or Chevy, with cloth-wrapped wires and bare metal compression fittings that corroded after six months.
>In my Subaru, the metal is galvanized, and heat/weight sensitive bits on the undercarriage are made out of aluminum.
>In a 50s-60s Chevy or Ford, the metal would have been bare steel, maybe with a coat of paint that would chip and flake off the first time you drove down a gravel road, and the bottom would rust out after the first wet winter.
>The engine in my Outback is 2.5L and outputs about 175 HP. It has gone over 120,000 miles without a single problem. The only maintenance I've done is an oil and air filter changes. It's about 25% over mileage for its timing belt replacement, but I'll get around to that eventually.
>A 50's-60's Ford or Chevy V8 might be around 5L and might put out about 210-250 HP (FACTORY STOCK NON-MUSCLE VERSIONS). It would also require religious maintenance every 2500 miles or so (monthly). Not only that, but after just a couple of years the seals would start going and it would start burning oil like a thirsty camel refilling its hump after a long desert trek.
>People are also replacing their vehicles less often now. Back in my grandfather's day and age, he would get a new car every other year. Now people are keeping their cars for 8-10 years.
>Average Age of Vehicles Reaches Record High, According to Polk [1]
>Back in the 70's, the Honda sedan was REVOLUTIONARY because it would go 30,000 miles without a major problem. Overnight people were introduced to a small, reliable car that wouldn't cost an arm and a leg to maintain. Now it is considered completely pedestrian, unremarkable, average even, for a car to hit 100k with no problems whatsoever. Back in "the day" this was something Mercedes-Benz sent you a metal medallion to affix to your front grille to celebrate.
>That plastic bumper won't rust, won't deform after a brush up against a light post, is easy to recycle, and doesn't need to be welded or riveted into place, just pop out some retaining clips and replace the bumper. Plus, it won't kill someone if you hit them at 15mph, and it will absorb much more impact than the ungalvanized steel plate that used to be used in bumpers and fenders. The old "good" metal bumpers and fenders would transfer near 100% of collision energy to the passenger compartment, and they would start rusting the minute the paint got chipped in the wheel well.
>If you took a "good 'ole" metal car like a Galaxie 500 or Chevelle from back in the day and crashed it at 40mph head-long into a 2012 Toyota Camry, the Camry driver would walk away with scratches and bruises, and the EMTs would be prying the steering column out of the metal car driver's sternum.
Air travel at any quality grade is more affordable. It's true new budget tier offerings with fewer amenities have been created, but that has made air travel vastly more accessible than it once was, so I don't see it as a negative.
Laser eye surgery along with cosmetic procedures are vastly less regulated than the rest of healthcare, and coincidentally, the only areas of medicine where costs have declined for procedures after adjusting for inflation. [2]
Bottom tier smartphones are far more capable than the first generation of smartphones, which was the $800 (inflation adjusted) iPhone.
> But it appears to me that this market is highly regulated - safety, fuel efficiency and longevity still hit the bare minimum, just the legal minima have been tightened over the years.
That's just because customers want something different. If the law requires 25 MPG and the carmakers can either give you a smaller, slower car that gets 60 MPG or a bigger, faster car that gets 25 MPG, lots of people pick the second one. Then you say they're barely meeting the minimum fuel efficiency but really the customer is the one making the trade off.
> Passenger air travel - you must be traveling first-class only to not notice that everything below is bottom-tier and getting noticeably worse every year. Sure, it's more affordable - I don't dispute that - but it's a question of how bad can quality go before it trumps price.
Air travel is a really weird market because the capital investment is huge but the market is fairly competitive, which is a recipe for bankruptcies. Make a bad prediction about customer demand or future fuel costs and you're not making enough to pay back the bank. Then they have to get creative or go out of business.
They tried price fixing for a while and got in trouble. The current trend seems to be cost cutting so they can lower the price and keep the seats full. It's the same thing as the cars: Customers keep picking the one with the lowest price, so they keep finding ways to lower the price.
> Smartphones, televisions - all examples of what I'm talking about. A huge amount of bottom-tier products, a few high-end flagship products. There's a degree of market segmentation so there's still some middle-tier options, but my impression is, they're rapidly dragged to the bottom.
This, and really most of the rest of your examples, is a result of China's long-term strategy to dominate manufacturing. Which is, use profits from one industry to subsidize another one until it dominates that too.
When they enter an industry their products are crap because they don't know how to do it yet. So no one would buy them. So they subsidize the price until they're cheap enough that people do. In a normal market they'd go out of business, but the government is financing their losses, so they don't.
Which destroys the middle tier products or forces them to slash quality and compete on price, because customers would pay more for them, but not infinitely more. And the low-end junk gets subsidized until it's cheap enough that people choose it.
That doesn't really apply to real estate. Real estate is already heavily tiered by price. If the 20th percentile house in a city is $200k and the 80th percentile house is $800k there will also be plenty of everything in between. It's not like the 20th percentile house is $200k and the 75th percentile house is $210k and the 80th percentile house is $800k.
Meanwhile most of the housing is still going to be the existing housing. If they build luxury housing, affluent people will buy it. If they build tiny studios, price-sensitive people will buy it. In either case you now have those people not bidding against you for the housing that already exists.
You are also under no obligation to wait for them to build something and then take whatever they offer. You can go to a construction company, tell them what you want and have them build it for you. You can get whatever you want -- if the zoning doesn't prohibit it.
This is generally caused by strict land use and single family zoning. In a situation where you can build a duplex/triplex/4plex on every single family lot, you can run an excess of housing in the areas that people actually want or need to live in which allows people to compete on other market factors like price.